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© Copyright 2017 Venture Valuation. All Rights Reserved.

PRODUCT

VALUATION

REPORT GT-002 IN SCHIZOPHRENIA

BY GABATHER AB

Skeppsbron 2, 1TR,

211 20 Malmö,

SWEDEN

Phone: +46 (46) 2863600

Email: [email protected]

URL: www.gabather.com

Date: April 2017 Version: 3.14

Venture Valuation Product Valuation – GT-002 in Schizophrenia 2


CONTENTS

CONTENTS 2

EXECUTIVE SUMMARY 3

INTRODUCTION 7

PRODUCT – GT-002 IN SCHIZOPHRENIA 7

INDICATION OVERVIEW 7

EPIDEMIOLOGY 8

TARGET PATIENT POPULATION 8

PRODUCT OVERVIEW 9

REGULATORY CONSIDERATIONS 9

INTELLECTUAL PROPERTY 9

COMPETITIVE LANDSCAPE 10

GT-002 SALES FORECAST 14

GT-002 PRICING 14

GT-002 SALES FORECAST 14

RISK ANALYSIS 16

RISK ASSESSMENT 16

VALUATION 18

OVERVIEW 18

DISCOUNT RATE 18

RISK-ADJUSTED NPV VALUATION (rNPV) 19

REFERENCES 21

APPENDIX I: GT-002 VALUATION ASSUMPTIONS 22

ABOUT VENTURE VALUATION 24



EXECUTIVE SUMMARY

INTRODUCTION

This valuation was commissioned by Gabather AB (Gabather) to help establish a fair and

equitable value of GT-002, Gabather’s lead product, in the treatment of schizophrenia.

Venture Valuation has calculated the rNPV (risk-adjusted net present value) of GT-002

at the point of CTA approval in Q4 2017 and considering two patent protection

scenarios:

• Scenario 1, based on current patent protection, which covers Europe and Canada

with expiration date of 2029 and the US with expiration date of 2031, as well as

China and India (not included in the analysis); and

• Scenario 2, based on patents currently being prepared for submission, covering

the above geographies, and including Japan, and with an expected priority date in

2017.

PRODUCT

GT-002 is a small molecule GABAA receptor modulator and is initially being developed for

schizophrenia. GT-002 is in preclinical development, with CTA-enabling studies ongoing.

A CTA approval is targeted for Q4 of 2017. Clinical Phase I, single and multiple dose

ascending studies in healthy volunteers, are projected to start in early 2018. GT-002 is

positioned as an innovative therapy initially indicated in the treatment of schizophrenia,

with a novel mechanism of action and the potential for a highly favorable safety profile.

INDICATION

Disease Overview Schizophrenia is a complex, multifactorial and polygenic mental disorder, characterized

by the heterogeneous presence of cognitive symptoms affecting perception, thought,

attention, memory and emotion. It is among the most disabling and economically

catastrophic medical disorders, ranked by the World Health Organization as one of the

top ten illnesses contributing to the global burden of disease.

Symptoms of schizophrenia include positive, negative, cognitive and mood symptoms.

Although there is no cure for schizophrenia, numerous drugs are available for initial and

maintenance therapy, with the goal of controlling symptoms. Second-generation,

atypical antipsychotics are the agents of choice for first line treatment of schizophrenia.

Epidemiology In 2011, schizophrenia was diagnosed in 21 million people worldwide. According to the

WHO, schizophrenia is responsible for 1.1% of total disability adjusted life years, and

absorbs 1.5%-3.0% of all healthcare expenditure in developed countries. In Europe, it is

estimated that there are about 5 million persons with schizophrenia, with a prevalence

of 0.6%-0.8%. The disease affects 1.2% Americans. In 98% of cases disease onset

occurs before the age of 40 years with a slight male predominance.

Target Patient Population

prevalence number of patients 2023E

Europe 0.70% 3.7m

US & Canada 1.20% 4.6m

Japan* 0.54% 676’000

*Japan patients are considered in Scenario 2 only



MARKET

Competitive Landscape Existing competitors: A multitude of antipsychotic products are currently available for

the pharmacological management of schizophrenia, many of which are already available

as inexpensive generics. None of the currently available therapies is curative. There is a

large remaining medical need for novel therapies with enhanced safety profiles, as well

as for therapies effectively addressing negative symptoms.

Upcoming competitors: There are 360 products in the pipeline for conditions associated

with schizophrenia, 60 of which are “first in class”, equating to more than 20% of

products with a disclosed molecular target. Recent market analysis from Globaldata

forecasted that serotonin receptor 5-HT2A antagonists contribute to 36.2% of total

revenues in 2025. Most of the upcoming pipeline clinical compounds are

phosphodiesterase inhibitors.

There is an increasing body of evidence from genetic and post-mortem studies

implicating an altered GABA transmission as a significant component of schizophrenia

pathophysiology. Recent research shows that low CSF GABA levels are associated with

the severity of illness, psychotic symptoms and attention deficits.(11)

Pricing We have based the potential cost of treatment with GT-002 on the average of the annual

costs of treatment with the antipsychotics Latuda, Invega, Invega Sustenna,

Cariprazine, Risperdal Consta, Seroquel & XR, Zyprexa and Abilify.

In SEK annual treatment price

Europe 54’620

US & Canada 68’000

Japan* 68’428


Sales Forecast The sales forecast of GT-002 in the treatment of schizophrenia assumes:

• Scenario 1: a market launch in 2023 in Europe, in the US and in Canada.

• Scenario 2: market launch in 2023 in Europe, US and Canada, followed by

launch in 2024 in Japan.

Sales forecast GT-002 worldwide (SEKm)

2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

Scenario 1 965.9 3,495.2 7,026.0 8,826.1 12,810.6 17,623.9 19,402.7 17,471.4 15,845.0 11,529.5

Scenario 2 965.9 3,581.7 7,336.0 9,443.6 13,579.4 18,729.5 21,400.9 21,669.6 21,750.0 21,828.7

RISK PROFILE

Included in the probability of success:

• Product Development Risk – rated high;

• Manufacturing Risk – rated low to medium;

• Regulatory/Approval Risk – rated medium to high;

Included in the discount rate:

• IP Risk – rated medium;

• Partnering Risk – rated medium;



• Financing Risk – rated medium;

• Competitive Risk – rated low to medium;

• Pricing and Reimbursement Risk – rated medium;

• Market Uptake Risk – rated low.

See body of the report for details.

KEY ASSUMPTIONS

Variable VV assumptions VV Comments

Patient population Schizophrenia patients

eligible for antipsychotic

treatment

Includes patients from first-break onward.

Markets Scenario 1: Europe, US and

Canada

Scenario 2: Europe, US,

Canada and Japan

Includes countries covered by patent protection, excluding

China and India.

Launch year Scenarios 1 and 2: 2023 in

Europe, US and Canada

Scenario 2: 2024 in Japan

Assuming 7 years of development for Europe and the USA

and Canada starting in 2017 (Scenarios 1 and 2), and 4

years of parallel development in Japan starting in 2020,

after Europe/US Phase IIb (Scenario 2).

Market share 10% Upside potential will be realized provided that the safety

profile is clearly superior to current generic treatments,

and provided there is efficacy in the treatment of negative

symptoms.

Peak sales Scenario 1:

Europe: SEK 7.6bn (2029)

US & Canada: SEK 12.4bn

(2030)

Scenario 2:

Europe: SEK 7.6bn (2029)

US & Canada: SEK 13.1bn

(2038)

Japan: SEK 1.7bn (2030)

Scenario 1: Peak sales will be reached at the patent

expiration date of 2029 in Europe, and in 2030 in US and

Canada where patent life expires in 2031 and 2029

respectively.

Scenario 2: Peak sales will be reached at the point of

population peak in 2029 in Europe and 2030 in Japan, and

at the point of patent expiration in 2038 in US and Canada.

Cumulative probability of

success (6)

7% As determined for preclinical stage products in

development for the treatment of diseases in the

Neurology/Psychiatry field.

Cost of development Scenario 1:

SEK 792m

Scenario 2:

SEK 1.16bn

Includes cost of development in Europe, USA and Canada

(Scenarios 1 and 2) and Japan (Scenario 2).

Discount rate (%) 20% Typical for early-stage products.



VALUATION GT-002 in the treatment of Schizophrenia

Value Range The value range for GT-002 was determined using the rNPV (risk adjusted Net Present

Value) method.

We note that, the product value will only then be retained in full by Gabather if they

market the product themselves in all geographies included in the current valuation. In

the event of a licensing agreement, the product value will be shared between the

licensor and the licensee, at a ratio what will be determined by the licensing

negotiations.

This results in a present value for GT-002 of SEK 226m in Scenario 1 and SEK 335m in

Scenario 2.

Product Valuation Discount rate

in SEKm 22% 21% 20% 19% 18%

Scenario 1 169.5 196.0 225.9 259.5 297.3

Scenario 2 253.2 291.7 335.3 384.6 440.6



INTRODUCTION

Professional

background

This report was prepared by Venture Valuation VV AG (Venture Valuation), a company

that specializes in the independent assessment and valuation of Life Sciences (biotech,

pharma, and medtech) companies and products. Additional information on the company

is available at the back of this report.

Assignment Venture Valuation was asked by Gabather AB (Gabather) to provide an independent,

third party valuation of GT-002, the company’s lead product. We calculated the value of

GT-002 at the point of CTA approval in Q4 2017 and considering two patent protection

scenarios:

• Scenario 1, based on current patent protection, which covers Europe and Canada

with expiration date of 2029 and the US with expiration date of 2031, as well as

China and India (not included in the analysis); and

• Scenario 2, based on patents currently being prepared for submission, covering

the above geographies, and including Japan, and with expected priority date of

2017.

Assumptions All of the assumptions that were made are set out in the body of this report. If any of

these assumptions change, the valuation represented herein may change.

Information In certain instances, we have relied on information provided by Gabather AB, and have

not been able to verify or audit the information received. Wherever possible, we have

tried to base the opinion set out in the report on our own research and independent

sources.

Statement of

Independence

This report is based on an independent opinion of Venture Valuation. Our fee in this

case is not dependent on the outcome of the value.

PRODUCT – GT-002 IN SCHIZOPHRENIA

INDICATION OVERVIEW Schizophrenia is a complex, multifactorial and polygenic mental disorder, characterized

by the heterogeneous presence of cognitive symptoms affecting perception, thought,

attention, memory and emotion. It is among the most disabling and economically

catastrophic medical disorders, ranked by the World Health Organization as one of the

top ten illnesses contributing to the global burden of disease (12). Several complex

factors including environmental, social and genetic background are thought to

contribute to the development of schizophrenia.

Symptoms of schizophrenia include positive, negative, cognitive and mood symptoms.

Positive symptoms consist of hallucinations, delusions, and thought disorders while

negative symptoms include apathy, lack of emotions, poverty of speech and poor social

life. Cognitive symptoms comprise poor executive functions and disorganized thoughts.

There is no known single cause underlying schizophrenia. Anatomic, neurotransmitter,

and immune system abnormalities have been implicated in the pathophysiology of the

disease.

Although there is no cure for schizophrenia, numerous drugs are available for initial

and maintenance therapy, with the goal of controlling symptoms. According to the



American Psychiatric Association, second-generation (atypical) antipsychotics (with

the exception of clozapine due to its risk for causing agranulocytosis or seizures) are

the agents of choice for first-line treatment of schizophrenia, as they are associated

with fewer extrapyramidal symptoms (3).

Since cognitive and negative symptoms rather than positive symptoms are more closely

associated with psychosocial impairments in patients with schizophrenia, non-

dopaminergic mechanisms including serotonin, glutamate, gamma-amino-butyric acid

(GABA), acetylcholine, inflammation and oxidative stress have been proposed as

potentially promising therapeutic targets. Long-acting injectable (LAI) antipsychotic

medications offer a viable option for patients who are non-compliant with an oral

medication (10).

EPIDEMIOLOGY

In 2011, schizophrenia was diagnosed in 21 million people worldwide (WHO factsheet)

(15). According to the WHO, schizophrenia is responsible for 1.1% of total disability

adjusted life years, and absorbs 1.5%-3.0% of all healthcare expenditure in developed

countries. In Europe, it is estimated that there are about 5 million persons with

schizophrenia, with a prevalence of 0.6%-0.8%. The disease affects 1.2% Americans. In

98% of cases disease onset occurs before the age of 40 years with a slight male

predominance (2).

Studies have found that incidence of schizophrenia increases in the teen years and

reaches a peak of vulnerability between the ages of 16 and 25 years. The pattern of

susceptibility to symptoms differs in men and women. Males are more vulnerable to

develop schizophrenia between the ages of 18 and 25 years where female vulnerability

peaks twice: first between 25 and 30 years, and then again around 40 years of age

(9),(12).

Most schizophrenia patients (approximately 80-90%) experience a relapse during the

course of their illness. Approximately 10-30% of patients are treatment resistant. The

largest unmet medical needs relate to therapies addressing: Cognitive dysfunction;

negative symptoms (such as lethargy, apathy, and social withdrawal); refractory

patients; adverse events; and lack of compliance (3).

TARGET PATIENT POPULATION

The projected target patient population for GT-002 is outlined below.

Country prevalence

Population

that receives

a

prescription

Compliance

rate (1),(7),

(8)

Market

share

Initial pool

of patients

(14)

Europe 0.70%

75% 50% 10%

139’000

US and

Canada 1.20% 172’000

Japan* 0.54% 25’000




PRODUCT OVERVIEW



pathophysiology (10). Recent research shows that low CSF GABA levels are associated

with the severity of illness, psychotic symptoms and attention deficits (11).

The GABA receptors are a class of receptors that respond to the neurotransmitter

gamma-aminobutyric acid, the main inhibitory neurotransmitter in the mature

vertebrate central nervous system. GABA receptors influence learning, memory, sleep

regulation, pain, anxiety, epilepsy, muscle tension, and various forms of dependence.

GABAA receptors are the most common receptors for GABA and are ligand gated ion

channels that can be found in various areas of the brain. Benzodiazepines, such as

diazepam (Valium) and clonazepam (Rivotril), as well as barbiturates, are well known

therapeutic molecules that target the GABAA receptor.

GT-002, a small molecule, is a positive allosteric modulator of the GABAA receptor. GT-

002 in-vitro was demonstrated to be highly selective for GABAA, and when evaluated in

animal models of psychosis and anxiety, did not have sedative or convulsive side

effects, while showing promising therapeutic efficacy.

GT-002 is initially being developed in the treatment of schizophrenia; follow on

indications could include bipolar disorder, depression, and others. For the purposes of

this valuation, we have focused on schizophrenia as the lead indication.

Product Development

and Timeline

GT-002 is in preclinical development, with IND-enabling studies ongoing. A CTA approval

is targeted for Q4 of 2017. Clinical Phase I, single and multiple dose ascending studies

in healthy volunteers, are projected to start in early 2018.

GT-002 in the treatment of schizophrenia is expected to follow a traditional drug

development path.

Product Positioning GT-002 is positioned as an innovative therapy initially indicated in the treatment of

schizophrenia, with a novel mechanism of action and the potential for a highly favorable

safety profile. The molecule’s potency will likely be comparable with the potency of

diazepam, but with a clearly distinct mechanism of action.

Manufacturing GT-002 will be available in both IV and oral formulations. Gabather is currently working

on formulating GT-002 in tablet form, and is completing scale-up and cGMP grade

manufacturing runs.

REGULATORY CONSIDERATIONS

Gabather will begin discussing the upcoming CTA submission and clinical development

plans for GT-002 with the European authorities in June 2017.

INTELLECTUAL PROPERTY

GT-002 is protected by a family of composition of matter “chemistry” patents that has

been issued in the US, Canada, China, India and in Europe. Projected expiration dates

are 2029 and 2031.



Gabather is also in the process of filing an additional patent to cover innovations in

formulation related to GT-002, among others. The new patent will also be filed in Japan.

COMPETITIVE LANDSCAPE

Existing Competitors

A multitude of antipsychotic products are currently available for the pharmacological

management of schizophrenia, many of which are already available as inexpensive

generics. None of the currently available therapies is curative. There is a large

remaining medical need for novel therapies with enhanced safety profiles, as well as for

therapies effectively addressing negative symptoms.

The following table summarizes the top-5 drugs for schizophrenia based on their sales

in 2016.

Product Company Indications Mechanism of action Administration and

Dosage

Sales 2016

(USD Million)

Invega

Sustenna

(Paliperidone

palmitate)

Johnson &

Johnson

Schizophrenia,

Schizoaffective

Disorder

5-HT2A Receptor

Antagonist, Dopamine

D2 Receptor Antagonist

Intramuscular

(Recommended monthly

maintenance dose is 117

mg in adults)

2,214

Abilify

(Aripiprazole)

Bristol-Myers

Squibb, H.

Lundbeck A/S,

Otsuka

Pharmaceutical

Co Ltd

Schizophrenia,

Tourette Syndrome,

Autism; Bipolar I,

Major Depressive

Disorder

5-HT Reuptake Inhibitor,

5-HT1A Receptor Partial

Agonist, 5-HT2A

Receptor Antagonist,

Dopamine D2 Receptor

Partial Agonist

Intramuscular, Oral

(10-15mg/day in

adolescents and adults)

1,697

Latuda

(Lurasidone

hydrochloride)

Sunovion

Pharmaceuticals

Inc

Schizophrenia,

Bipolar I

5-HT2A Receptor

Antagonist,

5-HT7 Receptor



Oral (40 to 160 mg /day in

adolescents and adults)

911

Risperdal

(Risperidone)

Johnson &

Johnson

Schizophrenia,

Autism,

Bipolar disorders,

Bipolar I,

Psychiatric

disorders

5-HT2A Receptor



Intramuscular, Oral (4-16

mg/day in adults; 1-6

mg/day in Adolescents)

893

Seroquel

(Quetiapine

fumarate)

Astellas Pharma

Inc, AstraZeneca

Schizophrenia,

Bipolar disorders,

Bipolar I,

Generalized Anxiety

Disorder,

Major Depressive

Disorder

5-HT2 Receptor



Oral (10-750mg/day in

adults; 400-800mg/day in

Adolescents)

810

Upcoming Competitors

Late-stage pipeline compounds:

Growth in the schizophrenia market likely will be driven by the potential introduction of

the promising late-stage pipeline products, which are directed towards significant

unmet needs.



Promising example compounds include:

• ALKS-3831, a fixed-dose combination of samidorphan, a mu-opioid receptor

antagonist, and the atypical antipsychotic drug olanzapine, is expected to be

launched in the U.S. in the third quarter of 2019.

• AVN-211 has received attention as a potential adjunctive treatment for the

cognitive impairments associated with schizophrenia.

• ITI-007 is expected to be launched in the U.S. in the first half of 2018 if it gains

FDA approval for the treatment of patients with acute or residual

schizophrenia.

• Lu AF35700 is expected to reduce the occurrence of adverse events

associated with the use of several antipsychotics, including extrapyramidal

symptoms, elevated prolactin levels, dysphoria/anhedonia, and depressed

mood.

• RBP-7000, a monthly sustained-release formulation of risperidone, is

expected to launch in the fourth quarter of 2017 for acute and maintenance

treatment of patients with schizophrenia.

• BB0817, a non-biodegradable, drug-eluting implant, is designed to deliver

risperidone for maintenance treatment of schizophrenia patients. NaBen,

sodium benzoate, showed greater improvements in negative symptoms and

cognitive deficits in a Phase II study and is currently being evaluated in Phase

III by SyneuRx and National Institute of Health.

In the table below we outline compounds for the treatment of schizophrenia that are

currently in Phase III development.

Product

name

Company name Molecule

type

Mechanism of action Route of

administration

ALKS3831 Alkermes plc Small (5-HT2A) Receptor Antagonist,

Dopamine D2 Receptor Antagonist,

Opioid Receptor Antagonist

Oral

AVN211 Avineuro Pharmaceuticals Inc

Small 5-HT6 Receptor Antagonist Oral

BB0817 Endo International plc, Braeburn

Pharmaceuticals

Small 5-HT2A Receptor Antagonist,

Dopamine D2 Receptor Antagonist

Subcutaneous

DSP5423P Sumitomo Dainippon Pharma Co Ltd

N/A Unknown Percutaneous

HP3070 Hisamitsu Pharmaceutical Co Inc,

Noven Pharmaceuticals Inc

N/A Unknown Transdermal

ITI007 Intra-Cellular Therapies Inc Small 5-HT2A Receptor Antagonist,


Dopamine D2 Receptor Partial Agonist

Oral

LuAF35700 H. Lundbeck A/S N/A 5-HT2A Receptor Antagonist,

5-HT6 Receptor Antagonist,



Oral

LY03004 Luye Pharma Group Ltd Small 5-HT2A Receptor Antagonist,


Intramuscular

Naben SYNEURX INTERNATIONAL CORP

Small D-amino acid oxidase inhibitor Oral

RBP7000 Indivior PLC, Reckitt Benckiser plc

Small 5-HT2A Receptor Antagonist,


Subcutaneous

ALKS3831 Alkermes plc Small 5-HT2A Receptor Antagonist,


Opioid Receptor Antagonist

Oral



Upcoming Competitors Contd.

Pipeline segmentation:

There are 360 products in the pipeline for conditions associated with schizophrenia, 60

of which are “first in class”, equating to more than 20% of products with a disclosed

molecular target (13). Recent market analysis from Globaldata forecasted that

serotonin receptor 5-HT2A antagonists will contribute to 36.2% of total revenues in

2025 (17). Most of the upcoming pipeline clinical compounds are phosphodiesterase

inhibitors.

The following table segments the pipeline compounds based on their distinct mechanism

of action in schizophrenia.

Product

name

Company name Development

Phase

Molecule

type

Mechanism of action Route of

administration

ALKS3831 Alkermes plc

Phase III Small 5-HT2A Receptor Antagonist Oral

AVN211 Avineuro

Pharmaceuticals Inc

Phase III Small 5-HT6 Receptor Antagonist Oral

ADX71149 Addex Therapeutics Phase II Small Glutamate Receptor, Metabotropic 2

(GRM2) Positive Allosteric Modulator

Oral

AQW051 Novartis AG Phase II Small Alpha7 Neuronal Nicotinic Receptor

(NNR) Agonist

Oral

AVP786 Rottapharm SpA Phase II Small N-Methyl-D-Aspartate (NMDA)

Receptor Antagonist

Oral

F17464 Pierre Fabre SA

Phase II Unknown 5-HT1A Receptor Partial Agonist Oral

GSK239512 GlaxoSmithKline plc

Phase II Small Histamine H3 Receptor Antagonist Oral

GWP42003 GW Pharmaceuticals

plc

Phase II Small Cannabinoid CB2 Receptor Agonist Oral

Idazoxan

Pierre Fabre SA Phase II Small Alpha-2 Adrenergic Receptor

(ADRA2) Antagonist

Oral

MK0777 Merck & Co Inc Phase II Unknown Gamma-Aminobutyric Acid Type A

(GABAA) Receptor Agonist

Oral

NE100 Taisho

Pharmaceutical Co

Ltd

Phase II Small Sigma1 Receptor Antagonist Unknown

NTx028 Trillium Therapeutics

Inc

Phase II Large Erythropoietin (EPO) Receptor

Agonist

Unknown

NW3509 Newron

Pharmaceuticals SpA

Phase II Small Sodium Channel, Voltage-Gated, Type

III, Alpha Subunit (SCN3A) Blocker

Oral

RG1662 Roche Phase II Small Gamma-Aminobutyric Acid A

Receptor, Alpha 5 (GABRA5) Negative

Allosteric Modulator

Oral

SB223412 GlaxoSmithKline plc Phase II Small Neurokinin NK3 Receptor Antagonist

Oral

SCH900435 Merck & Co Inc Phase II Small Glycine Transporter-1 (GLYT1)

Inhibitor

Oral



TAK063 Takeda

Pharmaceutical

Company Limited

Phase II Small Phosphodiesterase-10A (PDE-10A)

Inhibitor

Oral

Arvisol Echo

Pharmaceuticals BV

Phase I Small Cannabinoid CB1 Receptor Antagonist Unknown

BI409306 Boehringer Ingelheim

GmbH

Phase I Unknown Phosphodiesterase 9A (PDE9A)

Inhibitor

Unknown

HTL9936 Heptares

Therapeutics

Phase I Small Muscarinic M1 Receptor Agonist Oral

Upcoming Competitors Contd.

GABA Modulators in Schizophrenia and other CNS indications:



pathophysiology. Recent research shows that low CSF GABA levels are associated with

the severity of illness, psychotic symptoms and attentional deficits (11).

The below table summarizes the clinical status of various GABA modulators in

Schizophrenia and associated CNS disorders.

Product Company Indication Development

Phase

Mechanism of

action

Molecule type Administration

SAGE 547 Sage

Therapeutics

Depression,

Status

Epilepticus

Phase III GABAA Receptor

Positive

Allosteric

Modulator

Small Intravenous

Lorediplon Grupo Ferrer

Internacional SA

Insomnia Phase III GABAA Receptor

Modulator

Small Oral

RG 1662 Roche Schizophrenia,

Ischemic stroke

Phase II GABAA

Receptor, Alpha

5 (GABRA5)

Negative

Allosteric

Modulator

Small Oral

ASP 8062 Astellas Pharma

Inc

Fibromyalgia Phase II GABAB Receptor

Positive

Allosteric

Modulator

NA Oral

EVT 201 Evotec AG Insomnia Phase II GABAA Receptor

Positive

Allosteric

Modulator

Small Oral

Ganaxolone Marinus

Pharmaceuticals

Inc

Epilepsy, Post-

Traumatic

Stress

Disorder, West

Syndrome

Phase II GABAA Receptor

Modulator

Small Intravenous,

Oral

PF 06372865 Pfizer Inc Epilepsy, Non

Nociceptive Pain


Modulator

NA Oral



SAGE 217 Sage

Therapeutics

Depression,

Major

Depressive

Disorder,

Parkinson's

Disease


Positive

Allosteric

Modulator

Small Intravenous

CPP 115 Catalyst

Pharmaceuticals

Complex Partial

Seizures, Post-

Traumatic

Stress

Disorder,

Tourette

Syndrome, West

Syndrome

Phase I GABAA Receptor

Modulator

Small Oral

AP 325 Algiax

Pharmaceuticals

GmbH

Neuropathic

Pain, Spinal

Cord Injuries

Phase I GABAA Receptor

Modulator

Small Oral

Market Share Based on our analysis, there are currently over 50 new therapeutic products in

different stages of development for schizophrenia, of which 11 are in Phase III clinical

development. Thus we can safely assume an increasing competition in the future, with

new products coming to the market. Based on the pipeline, we could see 5 to 6 new

products on the market within 3 to 5 years. This risk has been taken into account in the

market share.

GT-002 SALES FORECAST

GT-002 PRICING

We have based our estimates on the average annual costs of treatment with the

antipsychotics Latuda, Invega, Invega Sustenna, Cariprazine, Risperdal Consta, Seroquel

& XR, Zyprexa and Abilify.

In SEK Annual treatment price with GT-002

Europe 54,619

USA & Canada 68,000

Japan* 68’428


GT-002 SALES FORECAST

Sales are projected assuming a market entry in 2023 for the US, Canada and Europe

(Scenarios 1 and 2) and in 2024 in Japan (Scenario 2).

Venture Valuation Product Valuation

GT-002 SALES FORECAST – SCENARIO 1

SEKm 2023 2024

Europe 380.4 1,370.2

USA & Canada 585.5 2,125.0

Total 965.9 3,495.2

GT-002 SALES FORECAST – SCENARIO 2

SEKm 2023 2024

Europe 380.4 1,370.2

USA & Canada 585.5 2,125.0

Japan 0.0 86.4

Total 965.9 3,581.7

MARKET UPTAKE FOR GT-002 IN THE TREATMENT OF

MARKET UPTAKE FOR GT-002 IN THE TREATMENT OF SCHIZOPHRENIA

Product Valuation – GT-002 in Schizophrenia


SCENARIO 1

2024 2025 2026 2027 2028

1,370.2 2,741.7 3,428.1 4,952.2 6,780.4

2,125.0 4,284.2 5,398.0 7,858.4 10,843.5

3,495.2 7,026.0 8,826.1 12,810.6 17,623.9

SCENARIO 2

2024 2025 2026 2027 2028

1,370.2 2,741.7 3,428.1 4,952.2 6,780.4

2,125.0 4,284.2 5,398.0 7,858.4 10,843.5

86.4 310.0 617.6 768.8 1,105.7

3,581.7 7,336.0 9,443.6 13,579.4 18,729.5

IN THE TREATMENT OF SCHIZOPHRENIA – SCENARIO 1

002 IN THE TREATMENT OF SCHIZOPHRENIA – SCENARIO 2

15

2029 2030

7,616.7 5,101.4

11,786.0 12,370.0

19,402.7 17,471.4

2029 2030

7,616.7 7,614.0

12,277.1 12,370.0

1,507.1 1,685.6

21,400.9 21,669.6



RISK ANALYSIS

RISK ASSESSMENT

Risk Factors

Below we summarize the risk factors, as we see them associated with GT-002. Risks

are presented as product development specific risks and non-product development

specific risks.

We note that, product specific risks are reflected in a direct risk adjustment as part of

the rNPV method, whereas non-product specific risks are reflected in the overall

discount rate.

The risk ratings used are designated as low (lower than average as compared to similar

products), medium (average), and high (higher than average).

Product Development

Specific Risks

We see the key product development specific risks as follows:

Product Development Risk:

• Risk Rating – high. Largely due to early development stage, but mitigated by

promising proof of concept results in animal models.

Manufacturing Risk:

• Risk Rating – low to medium. Largely due to the fact that GT-002 is a small

molecule and manufacturing is typically straight forward.

Regulatory/Approval Risk:

• Risk Rating – medium to high. Largely due to novel mechanism of action, risk

will decrease to medium once positive clinical safety and efficacy become

available.

Non-Product

Development Specific

Risks

We see the key non-product development specific risks for GT-002 as follows:

Intellectual Property (IP) Risk:

• Risk Rating – medium. Due to limited limited patent life for issued patents. This

is mitigated to medium to low, once additional patent filings progress in their

path to approval.

Partnering Risk:

• Risk Rating – medium. Largely due to high interest from large Pharma

companies to add innovative products to their antipsychotic products portfolio.

Financing Risk:

• Risk Rating – medium. Largely due to the fact that Gabather is a listed company

with access to public capital markets.

Competitive Risk:

• Existing competitive risk: low to medium. Due to the limited market availability

of effective and safe treatment options for schizophrenia.

• Upcoming competitive risk: low to medium. Due to novel mechanism of action,

potential for superior safety, some promising late stage examples, and highly

limited competitors based on GABA.



Pricing and Reimbursement Risk:

• Risk Rating – medium. Due to the fact that new effective and safe antipsychotic

drugs are likely to receive reimbursement approval, provided the target price

is backed by positive clinical trial results.

Market Uptake Risk:

• Risk Rating – low in the short term, driven by the unmet need for a therapeutic

product in schizophrenia with superior safety and efficacy profile. In the long

run, market uptake will be shaped by the safety/efficacy of earlier stage

products currently in development.



VALUATION

OVERVIEW

Methods used The risk-adjusted Net Present Value (rNPV) was used to provide an objective

assessment of the value of GT-002 in the treatment of schizophrenia.

rNPV/Risk-Adjusted

NPV

The most appropriate method to value pharmaceutical/biotechnology products is the

risk-adjusted net present value (rNPV) method that factors in the success rate of

therapeutic products in development. These success rates are then used to discount

yearly free cash flows for the entire product lifetime. The full assumptions for the

expected revenues from GT-002 in schizophrenia are described in the following

sections.

Deal Value Split In the event of a licensing agreement, the product value will be shared between the

licensor and the licensee. The deal split in this case will be determined as part of the

licensing negotiations (5).

We note that the product value will only then be retained in full by Gabather if they

market the product themselves in all geographies included in the current valuation. For

the purpose of this report, and, as requested by Gabather, we have only included the full

value of the product.

DISCOUNT RATE

Product specific risks Taking into consideration the stage of development and the cumulative success rate of

GT-002 in schizophrenia, the probability of a product launch has been determined to be

7%.

Success rate (6)

Phase Ia Ph Ib/IIa Ph IIb Ph III Approval

Probability of

Success 60% 71% 32% 63% 82%

Cumulative

POS 43% 14% 9% 7%

Non-product specific

risks at 20%

The non-product specific risks take into account that for the rNPV, the attrition risk of

each phase (including the post-marketing phase), has already been included in the risk

adjustment. Thus the discount rate only includes risks that are not directly associated

with the development of an individual product. We set this risk at 20%.

Discount rate for rNPV

Risk free rate of return (16) 0.21 %

Systematic risk (4) 3.60 %

Non product specific risks 16.20 %

Discount rate 20.00 %



Discount rate based on

CAPM

Our calculation of the discount rate is based on the Capital Asset Pricing Model (CAPM).

The CAPM provides a way to compute Cost of Capital, based on rates of return on debt

and equity. Its uses the risk free rate of return as a basis and adds the systematic risk.

We also add the non-product specific risk as described above.

RISK-ADJUSTED NPV VALUATION (rNPV)

Calculation based on

development plan

The figures for the rNPV calculation were based on information researched by Venture

Valuation or provided by Gabather, and adjusted by Venture Valuation. By determining

the potential development costs and market revenues of GT-002 using the rNPV method

the value of GT-002 in schizophrenia was calculated.

A median discount rate of 20%, and a range from 18% to 22% for sensitivity analysis

were used.



VALUATION OF GT-002 IN THE TREATMENT OF SCHIZOPHRENIA

Product valuation SEK

226m in Scenario 1

and SEK 335m in

Scenario 2

In Scenario 1, the full value of GT-002 is between SEK 170m and SEK 297m. Using a

discount rate of 20%, the average value is SEK 226m.

In Scenario 2, the full value of GT-002 is between SEK 253m and SEK 441m. Using a

discount rate of 20%, the average value is SEK 335m.

Product Valuation Discount rate

In SEK 000’s 22% 21% 20% 19% 18%

rNPV Scenario 1 169.5 196.0 225.9 259.5 297.3

rNPV Scenario 2 253.2 291.7 335.3 384.6 440.6

Copyright © 2017 Venture Valuation VV Ltd. All rights reserved. This report is provided for information purposes only. Under no circumstances is it to be used or considered as an offer, solicitation, or recommendation to sell, or a solicitation of any offer to or buy any security. While the information contained herein has been obtained from sources deemed reliable, Venture Valuation VV Ltd (i) makes no guarantees that it is accurate, complete, timely, or contains the correct sequencing of the information, or (ii) make any warranties with regard to the results to be obtained from its use, and (iii) shall have no liability for any claims, losses or damages arising from or occasioned by any inaccuracy, error, delay, or omission, or from use of the report or actions taken in reliance on the information contained in the report. Reproduction or redistribution of this report in any form is prohibited except with written permission. The providers of this report make it explicitly public in the report, if a position in the securities discussed herein is held.



REFERENCES

Meeting: Telephone discussions with the client, 6th April 2017.

Documents Provided/Considered:

Gabather’s company presentation dated 20th March 2017.

Gabather’s “Market and competitor report-2”.

Gabather patent overview.

Internal and External Databases:

Company, Product and deal database: Biotechgate.

External proprietary databases.

Articles/Reviews:

1. Acosta FJ, et al. “Medication adherence in schizophrenia. World Journal of

Psychiatry”. 2(5):74-82; 2012.

2. Altamura C., et al. “Schizophrenia today: epidemiology, diagnosis, course and

models of care”. Journal of Psychopathology, 20:223-243, 2014.

3. Fellner, Chris, “New Schizophrenia Treatments Address Unmet Clinical Needs”.

P&T Community P.T. 2017; 42(2): 130-134.

4. Frei, Patrik, “Assessment and Valuation of high growth companies”, Haupt

Verlag, 2006

5. Frei, P. and Peire, A., “What is the value of a deal?”; BioPharma Dealmakers,

Nature Publishing Group, B27-28; 2016

6. Hay, M. et al., “Clinical development success rates for investigational drugs”,

Nature Biotechnology, 32, 40–51, 2014.

7. Higashi K, et al., “Medication adherence in schizophrenia: factors influencing

adherence and consequences of nonadherence, a systematic literature review”.

Therapeutic Advances in Psychopharmacology, 3(4):200-218; 2013.

8. Lacro JP, et al., “Prevalence of and risk factors for medication nonadherence

in patients with schizophrenia: a comprehensive review of recent literature”. J

Clin Psychiatry, 63:892–909; 2002.

9. Lynskey, M.T. and Strang, J., “The global burden of drug use and mental

disorders”. The Lancet. Bol 382, No. 9904, p1540-1542; 2013.

10. Mueller, T.M., et al., “Abnormal subcellular localization of GABAA receptor

subunits in schizophrenia brain”. Translational Psychiatry, Volume 5, e612;

2015.

11. Orhan, F., et al., “CSF GABA is reduced in first-episode psychosis and

associates to symptom severity.” Molecular Psychiatry, 2017 Mar 14. doi:

10.1038/mp.2017.25.

12. Whiteford H.A., et al., “Global Burden of Disease Attributable to Mental and

Substance use Disorders: Findings from the Global Burden of Disease Study

2010”. Lancet, 382 (9904):1575-86. Epub 2013 Aug 29.

URLs:

13. https://www.dddmag.com/news/2016/04/direction-schizophrenia-drug-

pipeline

14. www.census.gov/data/data-tools.html

15. www.who.int/mental_health/managemetn/schizo-phrenia/en/

16. markets.ft.com/Research/Markets/Bonds

http://www.fastmr.com/prod/1258834_pharmapoint_schizophrenia.aspx



APPENDIX I: GT-002 VALUATION ASSUMPTIONS

Criteria Value Reference

Patent expiration Scenario 1:

Europe & Canada: 2029

U.S.: 2031

Scenario 2:

Europe, Canada, US, Japan:

2028

Gabather/ VV assumption

Patient population Schizophrenia patients eligible

for antipsychotic treatment

Gabather/ VV assumption

Prevalence rate Europe: 0.7%

US & Canada: 1.2%

Japan: 0.54%

WHO

Market share 10%

VV assumption, driven by

presence of generics and other

competitors

Price annual treatment (SEK) Europe: 54,619

US & Canada: 68,000

Japan: 68’428

Based on the average of the

annual costs of treatment with

the antipsychotics Latuda,

Invega, Invega Sustenna,

Cariprazine, Risperdal Consta,

Seroquel & XR, Zyprexa and

Abilify

Peak sales Scenario 1 (2029): SEK 19.4bn

Scenario 2 (2038): SEK 22.3bn

Model estimate

Total sales (2023-2040) Scenario 1: SEK 145bn

Scenario 2: SEK 300bn

Model estimate

Key expenses for the product valuation

Expense Value Reference

Clinical & Manufacturing expenses

(SEKm)

Scenarios 1 and 2:

Europe, US & Canada:

Phase I (9 months): 1.9

Phase Ia (3 months): 9.6

Phase Ib/IIa (12 months): 48

Venture Valuation assumption



Phase IIb (12 months): 240

Phase III (24 months): 480

Approval (18 months): 14.4

Scenario 2:

Japan:

Phase IIb (12 months): 120

Phase III (24 months): 240

Approval (12 months): 9.6

Launch date Europe, US & Canada: 2023

(Scenarios 1 and 2)

Japan: 2024 (Scenario 2)

Venture Valuation estimate

COGS (% of revenue) 15%


Sales & Marketing (% of revenue) 25%


Discounts, Returns and Allowances

(% of revenue)

5% Venture Valuation estimate

G&A (% of revenue)

5% Venture Valuation estimate

Tax rate 23.5% OECD average



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